SPARTANBURG, S.C. — More than two years after the brand was first announced, the first ECHO Suites by Wyndham held its soft opening last week and will celebrate its grand opening this week in Spartanburg, S.C., with more properties poised to open in the coming months.
Wyndham President and CEO Geoff Ballotti first announced the new brand during the company’s 2021 full-year earnings call in early 2022. By the following September, 100 deals had been signed for the brand then known as Project ECHO (an acronym for Economy Hotel Opportunity), and that number doubled over the next six months.
Today, Ballotti said that ECHO Suites is the fastest-growing brand in Wyndham’s history, and he estimated that it is the industry's fastest-growing new-construction brand. Wyndham has nearly 270 ECHO Suites contracts signed, more than 33,000 rooms in the pipeline and more than a dozen hotels currently under construction. Of the company’s 2,000-hotel pipeline, he estimates between 10 and 11 percent are ECHO Suites projects. Among the developers, Ian McClure, CEO of Topeka, Kan.-based Gulf Coast Hotel Management and Carter Rise, chairman and CEO of Richmond, Va.-based Sandpiper Lodging Trust, are each set to open 25 ECHO Suites in the coming years.
Building a Brand
Krishna Paliwal—head of architecture, design and construction at Wyndham—said the company conducted “a lot of research” in the extended-stay segment as the brand took shape. Wyndham already had the Hawthorn brand for a foot in the proverbial door, but they “found a white space in the economy extended-stay space” as they looked to gain ground. At the 2021 AAHOA conference, Ballotti and several developers began discussing opportunities for a new brand that would fill that white space.
The team selected Modus Architecture out of Dallas—who had previously worked with Wyndham on the Moda prototype for the Microtel brand as well as a dual-brand prototype for La Quinta and Hawthorn—to develop the concept. At a developer’s meeting in 2021, those developers outlined what they wanted in a new economy extended-stay brand: large closets for many days’ worth of clothing, storage space under the bed and full-sized refrigerators, to start. At the same time, Paliwal said the developers wanted a building that would be aesthetically pleasing but also functional. “Our architecture team started making changes while we were discussing the concept with these developers.”
The final 50,000-square-foot, 124-suite prototype meets all of those needs, he continued, with curbside appeal and enough space to prevent claustrophobia when guests stay for a week—“or two or three.” And while aesthetics are important, “every design needs to be functional,” he added. “If the design is not functional, it is not a good design.” Paliwal believes that ECHO Suites will redefine what economy hotels can be: “A modern, new, crisp, comfortable space can be an economy space,” he said.
Philip Cox, co-CEO and co-founder of Cox Universal Group, has developed a number of hotels with other companies, but was “excited” by the new brand and wanted to be a part of its development. The teams from other extended-stay brands were “not listening to the developers anymore,” he said. “This was an opportunity to work with some folks that did.” (Cox has Ballotti’s mobile phone number and said that the CEO “responds immediately” when texted or called.) Notably, he believed the concept required a hotel company with experience in the economy space. “They already had this huge economy customer base,” he said. “Wyndham is one of the best at that.”
“If anybody knows the economy guest in our industry, it is Wyndham,” Paliwal said. “We own this segment. What we were missing was the extended-stay component, and that's what our developers saw and what we can bring to the table.”
Working with companies like Cox Universal Group, Gulf Coast Hotel Management and Sandpiper Hospitality was an important part of the brand’s evolution in terms of both design and operating standards. “These are sophisticated developers who know how to build and know how to operate,” Ballotti said, noting that design is “super important” for efficiency in both construction and operations.
Consistency, Efficiency and New Construction
In order to maintain consistency from property to property, all ECHO Suites are new-build hotels. “Existing hotels just don't have the infrastructure in place to be able to put full-sized kitchens [in the guestrooms],” Cox said, noting that retrofitted hotel rooms can run into electrical challenges if the room is not wired for the kitchen equipment used in a long-term stay. At the same time, many transient hotels in the economy and midscale space do not have large enough guestrooms for week-long stays. “It really takes a new-build to do it right,” Cox said, adding that guests frequently seek out newer hotels in their destinations for both long or short stays.
The consistency of a new-build hotel can also mean consistency in terms of development costs, Paliwal added. The cost of the lumber, Sheetrock and concrete will be the same no matter what a developer is building, he explained—but efficient design can make those costs stretch further. For example, the hallways in the ECHO Suites prototype are five feet wide, matching the width of a traditional carpet roll, so there is no need to trim the carpet to a custom size. Likewise, each guestroom’s ceilings are eight feet high because the length and the height of a standard piece of Sheetrock is four feet by eight feet. Installing two sheets horizontally eliminates the need to cut any excess, which reduces the need for additional labor. “You're reducing the hours which an installer needs to spend at the site,” Paliwal said. Similarly, floors lined with luxury vinyl tile are more affordable for developers to procure and operators to maintain than floors lined with carpeting. Only queen-sized beds are used across all room types (60 percent of rooms have two beds and 40 percent have one) so owners can order and store a single size of linens rather than requiring multiple sizes.
The new brand also avoids the “extra fluff” that adds costs at hotels—and that economy travelers tend to care little about, according to Cox. For example, the hotels will offer housekeeping and fresh linens every 14 days instead of daily or every three days. And while many extended-stay hotels offer complimentary breakfasts, ECHO Suites has vending machines as the only on-property food-and-beverage service, keeping costs down for both operators and guests. The brand also eschews meeting rooms, a pool or the outdoor grills that have become prevalent at other extended-stay hotels. “You're not going to go out there and grill with other guests you don't even know,” he said. “You need to have good Wi-Fi. You need to have a great TV. You need to have a comfortable bed. That's what people really want.”
In the southeastern U.S., Paliwal said, the construction cost for an ECHO Suites building is between $170 to $190 per square foot, and Cox believes a property can be run by between seven and seven-and-a-half full-time equivalent workers for operational efficiency. To reduce the need for on-site workers around the clock, a glass wall with a locked door separates the front desk from the main lobby. The desk is not staffed overnight, and guests coming back after hours can use their room keys to enter the building.
Ballotti expects the brand to drive “record levels” of gross operating profits thanks to these efficiencies. “The returns for these developers are very high,” he said. “Industry GOPs range between 30 and 40 percent, depending on the segment. These, if you're doing them well … are north of 60 percent.”
The First ECHO
The Spartanburg property is owned by Cox Universal Group and managed by Sandpiper Hospitality. During the 2022 Hunter Hotel Investment conference, Philip Cox spoke with friends who had already signed on for ECHO Suites properties and decided he wanted in. “Three or four months later, we finally worked out something with Wyndham and then we broke ground [in] 2023.”
As the first property began to take shape, the development team “found additional things that will create further efficiencies,” Paliwal noted. “We are incorporating those efficiencies into hotels to come.” Future hotels will likely require a shorter development time, he added, without costing “more than what it's supposed to.” Cox calculated that the debut hotel cost $117,000 per key to bring together, not including developer fees. Once the property is fully up and running, Paliwal expects occupancy to be between 80 and 85 percent with revenue per available room to be somewhere in the $60 range, with guests typically staying between 17 and 20 days. Wyndham, Paliwal added, will provide a rebate of half a percentage point from royalties to every hotel that is maintaining an average length of stay of 14 nights for a year.
Spartanburg was a logical market for an economy extended-stay hotel, Cox said, as it is seeing an influx of investment. Paliwal and Cox noted the nearby BMW factory and an inland port in Greer, S.C. as notable drivers for business-related travel. “There is a lot of manufacturing and manufacturing requires people to come in to work at the plant—fixing machineries and doing the maintenance of the machineries,” Paliwal said. Economy extended-stay hotels like ECHO Suites will provide accommodations for the people coming to work in these facilities, he added.
Extended-Stay Expands with New Demand
As housing prices continue to rise and remote working becomes more common, Cox expects to see demand continue to grow for extended-stay hotels. “As long as there's going to be continued transition in the market—people relocating to different places—there's also going to be demand for this.” Ballotti estimates 20 million people are now working remotely.
The extended-stay market is “underserved,” Ballotti noted, while demand for the segment is still growing. In the first quarter of 2024, he said, RevPAR in economy extended-stay hotels was up 17 percent compared to 2019, about four points higher than the rest of the industry.
At the same time, he said, extended-stay demand from developers is “up double digits” year over year. Development has increased to match: Ballotti estimated that extended-stay hotels make up “well over a third” of the domestic pipeline and are projected to grow at 7 percent—seven times faster than the rest of the domestic supply.
Increased spending on infrastructure also will drive demand for extended-stay hotels, Cox said, and Paliwal noted the need for properties in the economy space to house a shifting workforce. Brands like ECHO Suites, Paliwal said, are “providing them the accommodation which they can afford [in] a clean and safe environment.”
Ballotti specifically credited the 2021 passage of the Infrastructure Investment and Jobs Act and the 2022 passage of the CHIPS and Science Act to the current demand for accommodations around manufacturing plants. “It’s really just starting to get going,” he said of the Acts' impact on development. Spartanburg is a good example of this investment, he added, noting that South Carolina has so far received $9 billion in infrastructure grants with Spartanburg alone receiving $1 billion. In the Austin, Texas, suburb of Taylor, a Samsung semiconductor plant is under construction with $6.4 billion in funding from the CHIPS and Science Act—and Gulf Coast Hotel Management is slated to open an ECHO Suites half an hour away next spring.
Wyndham’s teams have targeted and identified more than 3,600 infrastructure projects—out of the 40,000 that the federal government has announced—for possible hotel development. “Our targeting of the markets that we've identified for development … are those markets that are within 10 miles of sites that have either broken ground or about to break ground,” Ballotti said, emphasizing the company’s confidence that demand will follow construction.
As infrastructure companies seek long-term accommodations their workers, Ballotti said that they are “looking first and foremost in the economy new-construction space, which is what so excites our developers.” Those developers, he added, are confident that this is a good time to build, “despite interest rates being a bit higher than they were. … They view those interest rates as transitory. They know that they're going to be able to refinance at some point.” Ultimately, Ballotti said, Wyndham's development partners believe that the industry is “just beginning to see a long-term run of demand” for economy extended-stay hotels.